Stock diagnosis: Is Cipla a good buy for investors post Q3?

MUMBAI: Shares of Cipla have pared most of the gains after surging 6 per cent in reaction to third quarter results.

The results were below Street estimates as the exports offset growth in domestic market.

According to analysts, rollout of inhalers in Europe and supplies of esomeprazole ( Nexium) to Teva will be key triggers for the stock in coming quarters.

Currently, the company sells Salmeterol Fluticasone inhaler device across five countries.

The company reported 15.31 per cent increase in its consolidated net profit at Rs 327.85 crore in the third quarter ended December 31, 2014. It had posted a net profit of Rs 284.31 crore in the same period last fiscal.

Net sales during the period under review stood at Rs 2,624.71 crore as against 2,567.97 crore in the year-ago period, the company said in a filing to the BSE.

Domestic sales grew by 14.2 per cent to Rs 1,199 crore during the period under review, up from Rs 1,050 crore in the year-ago period, it added. Some brokerages have maintained positive stance on the stock and have raised their target price on the stock.

“Cipla delivered another across-the-board miss as exports and API growth collapsed due to supply issues, offsetting strong India growth and resulting in a guidance miss,” said Kotak Institutional Equities report.

“While we cut our FY2015 EPS by 6.3 per cent, the impact is limited for FY2016/17 due to several growth drivers including Nexium profit share, 7.5 per cent SEP increase for CY2015, US build-out and market share gains in Advair pMDI in the EU,” the report added.

Kotak has raised its target price to Rs 720.

Cipla’s management has guided sales growth of 9-10 per cent in Q4FY15 and mid-teen growth in FY16E.